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High Gold Prices Hurt Consumer Demand on Akshaya Tritiya

Gold prices up over 30% in the past year.
Apr 25, 2012 8:11 AM   By Dilipp S Nag
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RAPAPORT... Consumer demand for gold was tepid due to high prices  on Akshaya Tritiya, one of the most auspicious days in the Hindu calendar to buy precious metal and jewelry. Sales improved by value from 2011, but declined in terms of volume.

“The gold prices have risen by over 30 percent in the past one year,” said Bachhraj Bamalwa, the chairman of All India Gems and Jewellery Trade Federation (GJF). “Overall, the enthusiasm which should have been there wasn't there this time.”

Gold prices in India, the world's largest consumer, are now quoting above $557 (INR 29,000) per 10 grams, up from around $423 (INR 22,000) a year ago.

Bamalwa noted that usually consumers start booking jewelry purchases one week before Akshaya Tritiya, but that trend wasn't apparent this year.

“Overall the sales have risen by about 10 to 15 percent in value terms but volume-wise sales have not increased,” he said.

Mahavir Lodha, the chief executive for Mumbai Wholesale Gold Jewellers Association, said that sales were good and there was good demand for coins and jewelry. He added that jewelry retailers also extended their shop closing timings in Zaveri Bazar — traditionally a focal point for the city’s jewelry trade.

“Akshaya Tritiya wasn’t very happening for a diamond jeweler like me. There were couple of customers who did some booking, but it was just a normal day for me,” said Vinit Parekh, a partner at Jewel Melange. “Akshaya Tritiya is more of a gold business. People are more interested in buying gold coins for that auspicious moment.”

Rakesh Jain of Mohanlal Otarmal Jewellers said that sales were not very extraordinary but there was consistent demand.

Industry officials said that jewelers were also wary of stocking new inventory due to excise duty issue with the government.

Indian jewelers and bullion traders had been on strike since March 17 to oppose the government’s budget proposal, which imposed excise duty on unbranded jewelry and increase some other taxes. However, they opened their business in the first week of April after the Finance Minister, Pranab Mukherjee, gave them favorable assurances regarding their demands. Mukherjee is expected to announce the new measure in Parliament next month.

“Traders of gold in India kept themselves away from gold buying despite the upcoming Akshaya Tritiya festival mainly due to a weaker rupee which made imported bullion more expensive,” brokerage Angel Commodities said in a report.

However, the National Stock Exchange (NSE) recorded a traded value of $116.8 million (INR 6.08 billion) in gold exchange traded funds (ETFs) on Akshaya Tritiya, up nearly 44 percent from a year earlier. The number of units traded on gold ETFs stood at 2.2 million as compared with 2 million in 2011.

Volume for gold ETFs has been showing consistent growth over the past three years with an impressive participation from retail investors, especially on auspicious days like Akshaya Tritiya and Dhanteras.

NSE extended market time  on this Akshaya Tritiya, which expanded the opportunity for investing in gold ETFs until late in the evening and also waived the transaction charges for all trade in gold ETFs.
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Tags: Akshaya Tritiya, All India Gems and Jewellery Trade Federation, Angel Commodities, Bachhraj Bamalwa, diamond, Dilipp S Nag, etf, GJF, gold, Gold ETFs, India, Jewel Melange, jewelers, Jewelry, Mahavir Lodha, Mohanlal Otarmal Jewellers, Mumbai Wholesale Gold Jewellers Association, National Stock Exchange, NSE, Pranab Mukherjee, Rapaport, retail, Zaveri Bazar
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